A Study of the Relationship between the Characteristics of Internationalization Course and Performance: The Degree, Velocity, and Rhythm of Internationalization

Chiao Da Managemenl Re叫酬， 的 1. 31 No. 1, 20Jl pp. 1-39

國際化歷程特性與績效關條之探討.

國際化程度、速度與韻律

A Study of the Relationship between the Characteristics

of Internationalization Course and Performance: The

Degree,

Velocity,

and Rhythm of Internationalization

楊國彬 1 Kuo-Pin Yang

國立東華大學國際企業學系

Departmcnt of Intemational Business, National Dong Hwa University 朱博湧 Po-YoungChu

國立交通大學管理科學系

Department ofManagement Science, National Chiao Tung University 王少惡 Shao-Tzu Wang

玉山銀行泰和分行

Taihe Branch, E-Sun Bank,

摘要:過去學者研究國際化與績效間之關條峙，多將焦點置於國際化程度之 探討，而較少論及廠商國際化的其他程序特性，如擴張速度或規律性 。 本研 究嘗試綜合探討企業國際化程度、速度及音員律三者之績效意 j函， !驗詮廠商進 行國際擴張時之最適歷程特性 。 本研究以台灣上市上櫃製造業廠商為研究樣 本，採取綜合橫斷面 (929 家)與縱斷面 (2000-2004)(panel data) 之資料進行分 析 。 實證結果顯示，廠商國際化程度與績效問呈現先遞減、後遞增、最後再 遞減的三階段 S 型曲線關條，最適區間為1.3至 4.6 家海外子公司 。 在海外 擴張速度上，採取較慢(平均超過 14 年增加一家海外子公司)或較快(平均 少於 4 年增加一家海外子公司)之國際化速度的企業，具有較佳之績效;速 度越中的國際擴張並無助於績效提升 。 最後，在海外市場採取規律擴張模式 的廠商，其績效優於採取不規律撿張之廠商 。 綜合上述研究發現結果顯示﹒

I Corresponding author: Department of Intemational Business, National Dong Hwa Universi旬， Hualien County, Taiwan, E-mail: kpyang@mail.ndhu.edu.t

2 A Slu吵。llheRelalionship between lhe Characlerislics oflnlernationalizalion Course and Performance: The Degree. Velocity. and Rhylhm ollnternalionalization

國際企業宜採取或慢、或快的擴張速度，以規律穩、定之韻律步調，將國際化

程度維持於最適水準區間以利其績效。 本研究除彌補國際化文獻缺口外，對

企業從事國際化活動亦具有重要之管理意涵 。

關鍵字:國際化程度;國際化速度;國際化韻律:績效

Abstract While past studies focusing on the relationship between intemationalization and firrn perforrnance are abundant, most researchers simply captured the relationship between the degree of intemationalization and firrns'

perforrnance but neglected such process characteristics as pace and volatility of intemational expansion. This study aims to demonstrate an optimal portfolio of intemationalization characteristics in terrns of the degree, velocity, and rhythm. Using a sample of 929 Taiwanese listed manufacturing firrns, this study traced sample firrns' FDI activities from 2000 to 2004 and examined the relationship between the three characteristics of intemationalization and firrn perforrnance.

Empirical results show that the relationship between intemationalization degree and perforrnance could be graphically depicted as a three-staged S-shaped curve. MNEs with either deliberate or fast expansion on intelτlational markets outperforrned those with a moderate pace. ln addition, an unstable rhyt恤 (high volatility) in setting up foreign subsidiaries could do harrn to firrns' perforrnance 8ased on the findings above, an optimal portfolio of intemationalization characteristics suggests that r-心~Es maintain their intemationalization degree on the second stage, without under-developing or over-expanding their intemational markets. Meanwhile, on the way to the target degree of intemationalization, we suggest that MNEs expand either slowly with thorough deliberation or quickly in pursuing time economy while stabilizing their expansion. Managerial implications are provided, and suggestions are made for future studies

Keywords Degree of intemationalization; Velocity of intemationalization; Rhythm of intemationalization; Perforrnance

Chiao Da Managemenf Review 的131No. 1.2011 3

1.

Introduction

Under the tide of globalization and regional 巳conomic integration, boundaries between countries are blurring and competition in global markets is becoming more intense than ever before. Taiwan, a typical island economy, has

substantially relied on exports and outward FDI to sustain its economic growth According to the annual report of Investment Commission, MOEA, Taiwan

(2007), the compounded annual growth rate of outward FDI capital was more than forty percent during the years between 1991 and 2001. Although the figure

slightly decreased thereafter, intemationalization seems an inevitable trend for firms in emerging markets to grow and survive when domestic demand is Iimited.

As intemationalization pertains to resource allocation and future commltmer此， it bears strategic importance and performance implications. Firms can gain benefits from intemationalization, including cheap and advantageous

production factors (Jung, 1991; Porter, (990), the extension of product life cycle

(Vemon, 1966), and opportunities to arbitrage with discriminant pricing across

markets, among other things. Nevertheless, these benefits can be offset by the complexities, costs, and managerial challenges arising from further intematÍonalization (Hitt, Hoskisson, and Kim, 1997). The tradeoff between the

costs and benefits of intemationalization, therefore, becomes a paradigmatic

framework employed by researchers to examine the relationship between firm

intemationalization and performance (e.g., Contractor, Kundu, and Hsu, 2003; Lu

and Beamish, 2004).

Although there are a number of studies focusing on the relationship between intemationalization and performance, the findings are far from conclusive: some studies concluded that a linear relationship existed (e.g., Grant, 1987), while other studies supported nonlinearity (e.g., Geringer, Beamish, and daCosta, 1989). More recently, researchers (Contractor et al., 2003; Lu and Beamish, 2004) suggested a three-staged framework (or a sigmoid curve model), which depicts

that firms bear more costs than benefits from initially low levels of

4 A Swdy of the Relationship between the Characteristics of lnternationalization Course and Performance: The Degree. 俺的city.and Rhythm oj1nternationalization

degree of internationalization until a certain degree of internationalization is reached. Afterward, internationalization begins to bring net positive contributions to perforrnance up to a certain level of internationalization, but perforrnance again declines with a high leve1 of intemationalization. Because this framework integrates all pa仕erns of the relationship (positiv巴， negative, U-shape, and inverted U-shape) found in literature and reconciles the disconforrnities among re1ated studies, it is an important framework explaining and predicting the relationship between foreign expansion and firrn perforrnance. Nevertheless, this exploratory framework still calls for more rigorous examination of its external validity, especially its robustness in emerging markets.

Am句 or proportion of internationalization literature investigated how a firrn's involvement in international markcts affects its profitability. Studies ofthis sort generally suggest that fmns maintain their international involvement to a certain degree or within an optimal zone (e.g., Chiao, Yang, and Yu, 2006). Such a viewpoint derives the perforrnance implications of internationalization simply from a static snapshot but fails to recognize firrn internationalization as a dynamic process that has long been asserted (Johanson and Vahlne, 1977) and empirically validated. Under the process view, scholars suggested that, in addition to the degree of intemationalization, the relationship between internationalization and perforrnance take into account such process characteristics as velocity or rhythm (Verrneulen and Barkema, 2002; Wagner, 2004). Without simultaneously considering these characteristics, the norrnative implications of firrn internationalization are incomplete.

Conceptually, internationalization velocity refers to the speed at which a firrn reaches its internationalization level during a time period in the past. While intemationalization degree measures the extent to which a firrn is involved in intemational markets at a speci日 c time, intemationalization velocity gauges the changing rates ofa firrn's intemationalization levels within a time period (Wagner, 2004). Therefore, velocity reflects the pace of a firrn in its historical internationalization course, rather than provides a static snapshot as measured by the degree of internationalization. Because one of the dimens

Chiao Da Managemenl Reνlew 他1.31 No. 1.2011 5

velocity，的 a reflection of the concentration rate of resource commitment,

possesses important implications in the intemationalization-performance relationship in terms of the efficiency of resource allocation (Vermeulen and Barkema, 2002)

During the process of moving toward the target degree of intemationalization, the velocity is not necessarily kept constant; it may be fast during some times and slow during others. The regularity of intemational expansion velocity has been conceptuaIized as the rhythm of intemationaIization (Vermeulen and Barkema, 2002). A series of constant intemational expansion veIocities constitute a stable or regular rhythm of intemationalization; conversely, an unstable or irregular rhythm represents a series of fluctuated velocities of a firm's intemational expansions. Irregular rhythm of intemationaIization deteriorates the leaming capabiIity of a firm in absorbing intemational experience (Cohen and Levinthal, 1990) and thus is harmful for firm performance. The impact of rhythmic characteristic, therefore, should not be ignored when examining the intemationalization-performance relationship.

Although the path characteristics of intemationalization such as velocity and rhythm have been developed in the Iiterature, only a few studies have investigated their influences on firm performance (Vermeulen and Barkema, 2002; Wagner,

2004). Moreover, the empirical evidences of these studies were mainly drawn from westem developed countries such as the United States and Germany Whether the findings of the studies are appIicable to the Asian newly industrialized Asian economies, where intemationaIization agendas are highly condensed, still calls for more empirical inquiry. In addition, past studies general1y suggest firms strive toward an optimal or target degree of intemationalization for best performance (e.g., Chiao et al., 2006); however, these studies rarely provide any other suggestions regarding the speed and regularity that firms should adjust themselves toward in their target degrees of intemationaIization. On the contrary, for those studies examining the performance

implications of intemationalization velocity and rhythm (such as Vermeulen and

Barkema, 2002), none have indicated an optimal degree of intemationalization for firms to stride toward. In sum, because no specific study, to our knowledge, has

6 A Study 01 the Relationship between the Characteristics ollnternationalization Course and Performance: The Degl凹，始loci吵'.and Rhythm ollnternationalization

examined the relationship between intemationalization and performance, while simultaneously considering the path characteristics of degree, velocity, and rhythm, the normative implications suggested by past studies may be constrained, incomplete, and even biased.

In Iight of this Iiterature gap, this study aims to examine the intemationalization-performance relationship within a framework that integrates thorough characteristics of the course of intemationalization, such that an optimal intemationalization path that leads firms to pursue maximum benefits can be ascertained. Specifically, the objectives of this study are as follows: first, to empirically validate the most recently deveIoped S-curve model of the intemationalization-performance relationship in the context of a newly industrialized economy; second, to separately examine the influences of intemationalization velocity and rhythm, in addition to the degree of intemationalization, on firm performance; and third, to systematically examine the linkages between intemationalization process characteristics, namely degree, velocity, and rhythm, and firm performance to delineate an optimal intemationalization course that maximizes net benefits

2.

Literature

2.

1. Internationalization Degree and Performance

Researchers have based the intemationalization-performance relationship on a variety of related theories. These theories are reviewed chronologically as followed. Intemational Product Life CycIe (IPLC) theory (Vemon, 1966) depicts that each product and its associated technologies go through three stages of evolution: introduction, growth, and maturity. As the product goes through its life cycIe, comparative advantage in its production tends to shift from country to country. To take comparative advantages, firms interτJationalize their production bases around the world for better performance. Hymer (1976) rationalized firms FDI on the basis of firm-specific advantages such as technological and product differentiation capability instead of national comparative advantages. The exploitation of monopolistic advantages across countries can result in superior

Chiao Da Managemenf Reνlew 均 1.31 No. 1,2011 7

performance for firms. Intemalization Theory (Buckley and Casson, 1976)

contrasts the benefits and costs of retaining key business activities within the fmn

(i.e., FDI) against arm-Iength foreign entry strategies such as exporting. When the inte口nediary product markets are imperfect, the benefits of intemalization

outweigh its associated costs. For profit maximization, it is the firm, rather than

its products, that crosses coun甘y borders. Drawing from various theoretical

perspectives, Dunning (1988) proposed the eclectic paradigm as a framework for determining the extent and pattem of the value-chain activities that firms own

abroad. Dunning's framework integrated the ownership advantage, intemalization

advantage, and location advantage to explain firms' FDI. lts performance implication is that those who based th巴 ir FDI decisions on this framework will perform better than those who did not. The Transaction Cost Theory was one of the dominant theories explaining fi口ns'FDI in the 1990s. For example, Hennart (1991) argued that monopolistic advantage is not a necessary condition for FDI as

long as the coordination cost is lower in a hierarchical arrangement than in the market transaction. As a result, the intemationalization benefits arise primarily from the reduced transaction costs and increased efficiency gained from intemalization (i.e., FDI).

The resource-based view emphasizes the organizational capabilities and

implicit knowledge of the firm (Teece, Pisano, and Shuen, 1997). Researchers

argued that MNEs can gain benefits from intemational markets through the

sharing ofproprietary knowledge and resources (Fladmoe-Lindquist and Tallman,

1994). Dunning (1993) pointed out that when a firm possesses ownership

advantages that are embedded within the organization, the firm is likely to exploit

the advantages across countries by FDI to ensure the most efficient uses of its proprietary resources (Buckley, 1988). Along with the expansion of intemational markets, firms accumulate more resources, which in tum are committed to their

later foreign entries, thereby producing sustainable performance (Geringer,

Tallman, and Ols凹， 2000). Organizational leaming perspective regards

intemationalization as an opportunity for firms to gain intemational experiences and to diversi命 theirbusinesses (Kim, Hwang, and Burger, 1993). Organizational leaming perspective is

8 A Study ofthe Relationship between the Characteristics oflnternationalization Course and Performance: The Degree， 始locity，and Rhythm of lnternatio間lization

U-school) of internationalization (Johanson and Vahlne, 1977) in that both perspectives view each foreign investrnent as relevant and interdepende帥， differing from other theories such as transaction cost economics that view each foreign entry as an independent transaction.

While the relationship between finns' internationalization and profitability received much attention in academia, the findings are mixed (Contractor et al., 2003). Contractor et al. (2003) reviewed twenty-three internationalization -perfonnance articles and classified the pa悅rns into four relationship categories positive (Grant, 1987), negative (Collins, 1990; Siddharthan and Lall, 1982), U-shaped (Qian, 1997; Ruigrok and Wagner, 2003), and inverted U-shaped (Daniels and Bracker, 1989; Geringer et al., 1989; Hitt et al., 1997). Until recently, few researchers (Contractor et al.

,

2003; Lu and Beamish

,

2004) established a sigmoid (S-shaped) curve model to integrate all types of relationship found in past studies. The three-staged curve model postulates that multinationality is detrimental to finns' profitability at the initial stage of internationalization, but such hann will be counteracted by the benefits gained from higher degrees of multinationality after a threshold level. When firms' multinationality increases to an optimal level, at which multinationality produces maximum net benefits,

further international expansion again becomes detrimental to firms' perfonnance. During the first stage of internationalization, MNEs face the challenges of Iiabil向Iof fore耶mess (Zaheer, 1995), higher transaction cost (Henna此， 1991), far cultural distance (Davidson, 1980), diseconornies of low scale (Kogut, 1985), and incapability of cross-border administration (Gomes and Ramaswamy, 1999). Although MNEs may also enjoy locational advantages such as cheap production factors or tax incentives, the costs tend to outweigh the benefits, which tums the slope of the relationship negative

ln the second stag巴， the stage model (Johanson and Vahl肘， 1977) contends that while the lack of local knowledge deters MNEs from intemational expansions,

such hindrances are gradually mitigated when MNEs incrementally deepen their foreign involvement. ln this stage, MNEs become familiar with local markets and institutional environments. Thus, the liability of foreigrmess they faced in their early entries is larg

Chiao Da Managemenl Reνiew Vol. 3/ No. /,2011 9

knowledge about foreign markets begins to disseminate throughout the entire

organization (Ruigrok and Wagner, 2003), and the capabilities of administrati凹，

coordination, communication, and logistics are also expected to advance with the progress of foreign expansion (Kim et al., 1993). Geographical diversification

facilitates cross-border arbitrage, discriminant pricing, inside transfer, tax

shielding, market scanning (Grant, 1987), and so on. MNEs also foster their

ability to govem various ownership structures, which reduces the transaction costs (Henna此， 1991). AII of these factors contribute to the profitability of MNEs that maintain moderate levels of intemationalization.

The marginal costs brought by firms' intemationalization may exceed the

rnarginal benefits when MNEs over-expand their foreign markets (Contractor et

al., 2003). For one reason, over-expansion urges MNEs to enter into less or under

developed economies of low market potential; another reason is that fi口ns'

capabilities for administrating a number of geographically diversified subsidiaries

may not keep ahead of the complexities ansmg from their further foreign

expansions (Grant, 1987). The negative impacts of excessive foreign expansion were supported by other researchers (Hitt et al., 1997; Tallman and Li, 1996) and empirical evidence from emerging markets (Chiao et al., 2006; Chiao, Yu, and Lin,

2002).

The theoretical basis for the performance implications in the three stages of

intemationalization are summarized in Table 1. 8ased on the three-staged model

of intemationalizati凹，we propose H1:

H 1: The relationship between internationalization degree and firm

performance is nonlinear

,

with the slope being negative at low levels

,

positive at moderate levels

,

and negative again at high levels of internationalization.

10 A Sfu吵。{fheRelafionship between the Characterisfics o/lnternationalizafion Course and

Peηrormance: The Degree， 始loci似 andRhyfhm o/Infernafionalizafion

Table 1

A summary of Influential Factors of Firm Performance Under Different Sta2es of Internationalization

EZZY

Mm伽lhcm

dz心(立民)(ICZiL)

S叩ported

Iiterature

SM Liabilities offoreignness Buckley and Casson (1976); Johanson and Vahlne (1977); Zaheer

(1995)

。 L ; SM Leaming costs and effectiveness

+

+

Ruigrok and Wagner (2003); Johanson and Vahllle (1977)

10 Economies of scale 一 + Hitt el al. (1997); Kogut (1985)

10 OLl RBV: OL RBV: OL TC; IT IPLC OLl NT: SM SM RBV: OL Empirical studies (Taiwan) Economies of scope Ownership advantages

Resource accumulation and exploitation

Capabilities Transaction costs Extension of PLC

Production factor advantages

Market and oppo付umtles Cultural distance

Management & coordination

U -shaped n-shap吋

Total effect

+ Grant, Jammine, and Thomas (1988); Rugman (1981) Dunning (1988); Hymer (1976);

Fladmoe-Lindquist and Tallman (I994); Johanson and Vahlne (1977)

Kim el al. (1993); Johanson and Vahlne (1977) H ennart (I 991 )

Vemon (1966); Contractor el al. (2003)

Daniels and 8racker (1989) : Dunning (1988)

+ Grant(1987)

Davidson (I980); Evans and Mavondo (2002); Johanson and VahJne (1977)

Gomes 個dRamaswamy (1999); Grant (1987) Sun and Hsiao (2008)

Chiao el al., (2006); Chiao el al. (2002) + + + + + + + +++ 一 +

Con甘actor，Kundu, and Hsu (2003); Lu and Beamish (2004) (1 )10: lndus甘ialOrganization; lPLC: lntemational Product Life Cycle; IT: Intemalizationηleo旬;NT: Network theory; OL: Organizational Leaming; RBV

Chiao Da Management Review Vol. 31 No. 1, 2011 11

2.2. Internationalization Velocity and Performance

IntemationaJization velocity refers to how much foreign expansion a tirl1l undertakes in a certain period of time (Vermeulen and Barkema, 2002). A high degree of velocity indicates that a firm commits a great deal of resources in foreign markets within a short time period. Past studies focusing on the performance implications of intemationaJization velocity are few, with Iimited perspectives mainly on economic decisions (Vermeulen and Barkema, 2002). organizational leaming (Wagner, 2004), and strategic viewpoint (Wagner, 2004)

In terms of economic view, scholars argued that managers, being constrained

by bounded rationality and limited scope of recognition (Simon, 1959)、 tend to make suboptimal decisions under time pressure. The diseconomies of time

compression accrue to fi口ns that undertook a series of FDIs within a short period

of time (Dierickx and Cool, 1989). The other researcher (Wagner, 2004) also contended that firms expanding into foreign countries at a high speed will be unable to fully seize the profit potential of new expansions as discussed in the

previous three-staged model because some tacit benefits are interactive-based (i.e‘

k:nowledge development) and demand time to assimilate. Basing their view on

time compression diseιonomies (Dierickx and Cool, 1989) and limited absorptive capacity (Cohen and Levinthal, 1994), Vermeulen and Barkema (2002) 如此her

proposed that a rushed pace of internationalization will negatively moderate the relationship between muJtinationaJity and profitability.

The organizational leaming perspectiv巴， in echoing the intemationalization process view (Johanson and Vahlne, 1977), recognizes that internationalization benefits can be accumulated through the process of international expansion and be disseminated across organizational boundaries. However, firms with an appropriately high pace of internationalization may be overloaded with

k:nowledge and experiences that are beyond firms' absorptive capacity (Cohen and

Levinthal, 1994). As Eisenhardt and Martin (2000) put it:“Experience that comes

too fast can overwhelm managers, leading to an inability to transform experience

into meaningful leaming." A highly intemationalized company demands a sound communication and coordination mechanism that facilitates the flow of co叩orate

12 A SlUdy of the Re/ationship between the Characleristics of Internationalization Course and

Peiformance: The Degree. 給/oci紗，and Rhythm oflnternationalization

culture, policies, and infonnation (Birkinshaw and Hood, 1997), thereby building mutual trust among member companies. This is especially imperative for finns whose foreign subsidiaries are situated in a highly uncertain environment and are required a high degree of local responsiveness (Jacobs, 1974). In this case, time pressure owing to a high pace of intemationalization could lead to miscommunication among organizational members and control leakages between parent firms and foreign subsidiaries (Hub仗， 1991). As a result, a condensed

intemationalization schedule is disadvantageous in absorbing the benefits from knowledge learning and effective communication, while a moderately slow schedule of intemationalization allows adequate time for parent firms to build up a mechanism for communication and coordination and for foreign subsidiaries to fulfill their mandates (Venneulen and Barkema, 2002).

A 戶口iculartype of intemational business, the so-called bom global finns or intemational new ventures (INVs), has emerged in the global economy since the late 1980s. Oviatt and McDougall (1994) defined an 別V as “A business organization that, from inception, seeks to derive significant competitive advantage from the use of resources and the sale of outputs in multiple countries." Because INVs, by definition, achieve high levels of intemationalization within a short period of time from inception, generally within two or 伽ee years, they appropriately represent the business of a high intemationalization velocity. The emergence of INVs can be attributed to three factors (Madsen and Servais, 1997): entrepreneurs who possess high intemational initiative and capabilities to overcome the liabilities of foreignness, organizational routines such as p間-export

activities, which foster the capability of start-ups to transact across borders (Korhonen, Loustarinen, and Welch, 1996), and technological advancement and environmental changes that facilitate intemational business (Gabrielsson and ManekK.irpalani, 2004). All of these factors contribute to Il'叭1Sand allow them to overcome the difficulties arising from early intemationalization. In mapping the

three吋taged (S-curve) model of intemationalization-performance, JNVs may be able to bypass the fust stage of the negative relationship and quickly go into the second stage of the positive segment (Zah悶， Ireland, and Hitt, 2000). Wag

Chiao Da Managemenl Reνlew 的1.31No. 1.2011 13

tax and cost savings and intangible benefits such as the exploitation of

firm-specific advantages. Thus, for some firms like INVs, speedy

intemationalization positively contributes to firm performance.

In sum, the performance implication of intemationalization velocity may vary with different 可pes of firms. lnexperienced firms pursuing intemational expansion at a slow pace can deliberately deploy their resources in foreign

markets and develop an effective inter-organizationalleaming and communication

mechanism. Meanwhile, adequate time should be al10wed for parent companies to

coordinate strategic objectives across subunits and for subsidiaries to adapt

themselves to be responsive to local markets. When these benefits outweigh the

opportunity costs due to slow pace of intemationalization, firms stil1 gain net

positive benefits from sluggish intemationalization. In contrast, for intemational

businesses such 泌的咐， these entities may seek to quickly exploit their

advantages across countries and aim to seize foreign market potential in a short

period of time. In these cases, speedy intemational expansion can improve firm

performance when market benefits are more than enough to offset the time

compression diseconomies. Therefore, we hypothesize H2:

H2: Firms that internationalize at a low or fast pace outperform those that internationalize at a moderate pace; that is

,

the relationship between internationalization velod秒 andfirm performance exhibits a U-shaped curve.

2.3.

Internationalization Rhythm and Performance

Intemationalization rhythm refers to the regularity of the pace of

intemational expansions during a certain period of time. The distribution of

various intemationalization speeds over time reflects the volatility or rhythm of

firm intemationalization (Vermeulen and Barkema, 2002). Taking two firms as an

example, suppose that fiπn A and firm B established ten foreign subsidiaries

during the past five years, which indicates the same intemationalization speed for

the two firms during this period of tim巳 However， while firm B steadily

established two foreign subsidiaries each year, firm A increased the number of its

14 A Study o{ the Re/ationship between the Characteristics of lnternationa/ization Course and Performance: The Degree, Ve/oci軌。ndRhylhm of lnlernaliona/ization

years and then undertaking no additional expansion in the following three years. Therefore, an irregular pattem of foreign expansion (i.e., firm A) can be observed in which a high peak of rapid expansion is followed by a long period of inactivity

(Vermeulen and Barkerr嗨， 2002). In a word, while intemationalization speed measures the average pace of a firm 's intemational expansion, intemationalization rhythm captl.叮的 thevariance of the paces of intemationalization

Senge (1992) argued that whether organizations can successfully assimilate knowledge and experience from the past determines the effectiveness of organizational leaming in the futu間 that is, there exists an organizational leaming spiral in which the reservoir for accumulated knowledge and experienc已 is the fundamental basis for future leaming. In light of this view, absorpti'/e capacity is the key factor for firms in assimilating knowledge (Cohen and Levinthal, 1989). In the case of an irregular intemationalization rhythm, volatile

expansions can bring firms overloaded experiences that are difficult for firms to absorb from their recent past (Cohen and Levinthal, 1989; Barkema, Shenk缸， Vermeulen, and Bell, 1997). On the one hand, overloaded firms become ineffective in accommodating their additional foreign subsidiaries to current routines (Huber, 19叭 Vermeulen and Barkema, 2002). On the other hand, periads of stagnancy reduce firms' absorptive capacity (Cohen and Levinthal, 1989; Eisenhardt and Martin, 2000) becm.:se firms gradually fail to recall what

they have leamed :ong ago as well as what they must leam in the future (Bailey, 1989). In addition, inertia locks firms into existing structures and systems with rigid mentality (Bettis and Prahalad, 1995; Lewin, 1936). Based on the organizational leaming perspective, we infer that a volatile intemationalization rhythm characterized by rush peaks and stagnancy will be detrimental to firm performance. Therefore, we propose H3:

H3: F'irms that internationalize in a mode 01 reglllar (stable) rhythm

ou月peφrm those that internationalize in a mode 01 irregulur (unstable) rhythm.

Chiao Da Management Review 均1.3/No. /.2011 15

2

.4. The Optimal Characteristics of Internationalization Course 8ased on the three characteristics of intemationalization, this study establishes a typology that classifies MNEs into eight clusters as shown in Table 2. According 10 the three previous hypotheses, a firm that is involved in intemational markets, either incrementally with thorough deliberation or speedily

in pursuing time economy while stabilizing their a句 ustmentstoward the moderate target degree of intemationalization (the type eight firms in Table 2) will outperform other MNEs that do not demonstrate such intemationalization

characteristics. Therefore, we propose H4

H4: MNEs that maintain their internationalization degree on the second

(positil吋 stageby either expanding slowly with thorough deliberation

or by speedily in pursuing time economy while stabilizing their

expansion pe杉orm better than other MNEs that demonstrate a

d伊rentpor.份lio

0/

internationalization characteristics.

Table 2

The Combination of lnternationalization Characteristics: Degree

,

Velocity

,

and Rhythm

Rhythm Degree Regular

Irregular

3.

1. Sample and Data

Moderate 6. Moderate degree 2. High/low degree 5. M oderate degree 1. High/low degree Velocity

3. Methodology

Fast/Slow 8.Moderate degree 4. High/low degree

7. Moderate degree

3. High/low degree

The sample list for this study was obtained from the Taiwan Economic

16 A Stu砂 0/the Re/ationship between the Characteristics 0/ Jnternationa/ization Course and Performance: The Degree，始/ocity，and Rhythm 0/ Jnternationa/ization

profiles of listed companies in Taiwan. During the time frame considered in our analysis (i.e., between 2000 and 2004), there were 929 listed firms in the T日， which constituted 4,645 observations. When counting the numbers of foreign subsidiaries, firms without any foreign subsidiaries and subsidiaries located in tax heavens or being held without physical outputs were also excluded, leaving 3,650 observations. Those that displayed significant abnormalities (i.e., claiming financial crisis), or missing financial data for any of the five years of interest were also eliminated. The final sample contained 3,541 observations, representing unbalanced longitudinal panel data for testing H1 and H2. As the measure of intemationalization rhythm requires time series data to capture the dynamic of the pace of intemationalization over tim巴， 199 日rms were further eliminated due to incomplete data, which left 730 sample firms for testing H3. Of the 730 sample firms, 683 demonstrated a complete set of intemationalization characteristics and were retained for testing H4.

3.2.

Measurement 3.2.1. Dependent Variables

Past related studies often employed financial ratios as performance indicators, with only few exceptions utilizing non-financial proxies. Researchers considered that the consequences of strategy implementation can generally be ref1ected through the use of financial indicators (Grant, Jammine, and Thomas, 1988) Because this study aims to examine the performance implications of intemationalization, we chose to use retum on assets (ROA) (Grant et al., 1988; Hitt et al., 1997) and return on equity (ROE) (Buhner, 1987) 的 measuresof firm profitability. ROA was calculated as the ratio of after-tax net income to total assets and ROE was ca1culated as the ratio of after-tax net income to the net value of outstanding common stock.

3.2.2. lndependent Variables (1) Intemationalization degree

Several indicators have been used in past studies to measure the degree of firm intemationalization, including export ratio (Lu and Beamish, 2001), foreign

Chiao Da Management Reνlew 均1.31 No. 1,2011 17

sales ratio (Geringer et al., 1989; Grant et al., 1988), foreign assets ratio (Daniels and Bracker, 1989), the number of foreign countries where the firm operates in (Kog肘， 1985), and the number of the firm's foreign subsidiaries (Morck and Yeung, 1991), among others. Because measures like the export ratio, foreign sales ratio and foreign assets ratio can be greatly a在ected by global logistics and

intemal transfers in multinational enterprises, these measures may be biased and

lose their validity in reflecting firms' intemational involvement. However, the

establishment of foreign subsidiaries not only demonstrates a firm's commitment

to intemational markets, but this number can also be easily identified and calculated. Accordingly, this study adopted the number of foreign subsidiaries2 as

the proxy of intemationalization degree, as has often been done in prior studies (Vermeulen and Barkema, 2002)

(2) Intemationalization velocity

lntemationalization velocity measures the average changes in

intemationalization degree within a time frame. Two measurement issues arise:

the proxy of intemationalization degree and the selection of the observation time

frame. In accordance with our previous design in measuring the degree of

intemationalization and along with past literature (Vermeulen and Barkema, 2002),

we observed the change in numbers of foreign subsidiaries as a proxy for change

in the degree of intemationalization. In setting up the observation time frame, we employed the conceptual definition of an intemational new venture (INV) (Ovia前

and McDougal1, 1997) and observed how much time a firm took since its

inception to reach its current degree of intemationalization. We calculated the

ratio of the number of foreign subsidiaries to the firrn's age as a proxy for

intemationalization velocity; the higher the ratio, the faster a firm's

intemationalization speed

(3) lnternationalization rhythm

lntemationalization rhythm measures the volatility of the intemational

expansions, which can be observed from the change of the number of a firm‘s

foreign subsidiaries within a specific time period. If a firm engaged in rapid

2 Foreign subsidiaries outside three layers were excluded; Stock holding subsidiaries and those located in tax heavens such as Britisb Virginia Island were also excluded

IX .4 SfI，dνο/Ihe Relalionship between Ihe Characlerislics o/lnlernalionalization Course and Per/ormance: The Degree. 他locity.and Rhythm o/lnternationalization

international expansions and then became stagnant, the distribution of changes in

number of foreign subsidiaries will exhibit a high peak as a reflection of this rapid

international expansion. On the contr訂y， if a firm steadily expanded its foreign

subsidiaries at a regular pace, there should be a uniform distribution instead. Thus

Vermeulen and 8arkema (2002) utilized the kurtosis of the distribution of the

change in numbers of foreign subsidiaries as a measure of intemationalization

rhythm. In this study, we have adopted the same kurtosis measure devised by

Vermeulen and 8arkema (2002)3, where a high value of kurtosis indicates more

volatility in the intemationalization rhythm.

3.2.3. Control Variables

To control for the impact of firm size on profitability, we used the natural

logarithm of the number of total employees, a proxy commonly used in related

Iiterature (Gomes and Ramaswamy, 1999), as a surrogate for firm size. Capital

structure was highly correlated with firm profitability (Jensen, 1986). Consistent

with prior studies (Hitt el al., 1997), this study employed the debt ratio, as

measured by the ratio of total Iiabilities to total assets, into its models.

Intemationalization studies have discovered the moderating effect of such

firm-specific advantages as research and development (R&D) capability on the

internationalization-performance relationship (Kotabe, Srinivasan, and Aulakh,

2002). Thus, we have incorporated R&D intensi旬， as measured by the ratio of

R&D expenditures to total sales, into the models. Diversification has long been

regarded as a strategy for growing profits (Hoskisson and H肘， 1990). We

controlled for the effects of two types of diversi日 cation strategies on profitabili旬，

namely, total product diversification (TD) and unrelated product diversification

(UD). The entropy indices of total and unrelated product diversificatÎon were calculated according to Jacquemin and 8erry (l979t Finally, to contrast the

k

…

n=number of years observed‘X i =foreign subsidiaries expanded in year i;

s =standard deviation of x,

Chiao Da Management Reνiew Vol. 31 No. 1.2011 19

manifestation of sigmoid curve models in different industries, this study, based on the lndustry Classification Standards of the Taiwanese government, classified all

sample firms into four major industries. information and elec甘om凶， chemicals and plastics, metal and machinery, and food, textile, and others (FTO).

3.3.

Statistical Models

The three-staged sigmoid curve (Hl) and the U curve (H2) were examined

using a panel (cross-sectional & time-series) of data analysis. This panel data

analysis generated statistical results for the three models (i.e., OLS, fixed-effect, and random-effect). By conducting a series of tests, including the F-test, Hausman test, and Lagrange Multiplier test, we determined the best model of the three. We

examined the intemationalization rhythm hypothesis (H3) using multiple regression models of ordinary least squares (OLS) to analyze the cross-sectional

data. The examination of H4 was based on a multivariate analysis of variance (MANOVA).

Because the models for testing Hl and H2 contained the original variables (i.e., intemationalization degree in Hl and velocity in H2) as well as their squared and cubic terms, multicollinearity in the regression models is a legitimate concem To mitigate such concem, we followed the procedures suggested by Aiken and

West (1991) to standardize the variables for internationalization degree/velocity and their squared/cubic terms in corresponding models

4.

Results

4.

1. Descriptive Statistics

Table 3 shows the industrial heterogeneities of the variables studied. Of all sample firms, 72.4% were information and electronics (I&E) firms, followed by plastics and chemicals firms (11.6%). lndustrial differences exist in almost all

的

=

》

×

吼

)

ω

=

今

I

X

In

(沿)=

TD 即

N : # of product categories P,: sales ratio of product i M: # of industries engaged; 戶 : the sales percentage of each product categorγ P( : the sales percentage of sector j

20 A Sludy oflhe Relationship be仰自nIhe Characlerislics of lnlernalionalization Course and Performance: The Degree. 他的clly.αndRhythm of lnternationalization

attributes, except for the internationalization degree and rhythm. Possibly due to their shorter industrial ag白， I&E finns did not demonstrate a higher degree of internationalization compared to finns in other industries. What is particularly noteworthy is the significantly higher internationalization velocity and profitability of I&E finns among all industries. Meanwhile, I&E finns also demonstrate the highest R&D intensity among all industries, which supports the argurnent for the features of international new ventures that technological advantages facilitate finn internationalization (Knight and Cavusgil, 1996; Oviatt and McDougall, 1999). I&E finns were also characterized by their significantly higher degrees of unrelated diversification and lower levels of debt.

Means and standard deviations of variables and their correlations for the panel data analysis (Hl and H2) are summarized in Table 4. Table 5 shows the cross-sectional data analysis (H3). As shown in Table 4, the correlation coefficients for explanatory variables are moderate to high (0.50~0.83). To mitigate the concern of multicollinearity, we standardized all the explanatory variables as suggested by Aiken and West (1991). The correlation structure of Table 5 is quite similar to that of Table 4. Considering the potentially high correlation between ROA and ROE, we adopted the MANOVA to test H4.

4.2.

Results for Hypothesis Testing

Table 6 shows the regression results of the panel data analysis pertaining to the internationalization-perfonnance relationship. The significance of the F-test (F= 6.250,p < 0.01), LM test (LM= 1，549.峙，p < 0.01) and Hausman test (H =

132.32, p < 0.01) in the ROA model indicates that the fixed-effect model is best fitted with the data, which explains 62.1 % of the ROA variance. The fixed-effect model also has the best fit in the ROE model, which explains 55.2% of ROE variance. As exhibited in the fixed-effect model of Table 6, internationalization degree ofthe first order is negatively correlated with ROA (t = -7.079,p < 0.01); its squared tenn is positively correlated with ROA (t = 2.741, p < 0.01); and its cubic tenn is negatively correlated with ROA (t = -1.744, p < 0.1). Therefore, the three-staged sigmoid curve model is supported. The statistical results are highly robust in the ROE model. Therefore, Hl is supported and the extemal validity of

Chiao Da Managemenl Review Vo/. 31 No. 1, 2011 21

Table 3

Mean Differences of lndustrial Attributes

Attributes ROA ROE [nt'l Int'l Int'l Firm Debt Total Unrelated R&D Sample sizeb degree velocity rhythm' SlZe ratio diver. diver. intensi

Industry ty I.Food, textile 0.045 -0.016 3.873 。 130 1.672 2.695 0.443 1.066 0.186 0.008 377 (68) & others 2.Plastics & chemicals 0.072 0.070 4.255 。 140 0.801 2.547 。 384 1.152 。 222 0.018 411 (76) 3.Meta1 & machinery 0.089 。 092 3.229 0.117 1.364 2.706 。 441 0.970 。 161 0.009 188 (36) 4.lnfonnation & electronics 0.092 。 102 3.837 。 252 0.991 2.487 0.399 0.860 0.304 0.041 2,565 (550) Grand mean 0.084 。 085 3.857 。 219 1.053 2.528 0.404 0.921 0.275 0.033 3,541 (730) F-va1ue 27.807 37.434 1.661 43.356" 1.048 29.106" 14.691" 55.203 29.675 64.615

..

Post Hoc Test 4> 1" 4>1 4>1 3>2 3>2“ 3>4 4>1 4>1 4>2 4>2 4>2 3>4 3>4 2>3 4>2 4>2

3>1 3>1 4>3 1>2 1>2 2>4 4>3 4>3

2>1 2>1 1>4 1>4 1 >4"

p<O.OI, 'p<O.05

a Sample size for each variable was 3,541, with the exception that the sample size for intemationalization rhythm was 730

b Numbers in parentheses indicate sample sizes for intemationalization rhythm sample subset; A Chi-square test shows no differences between the two proportion dist巾utions

<1

= 3.162, p > 0.1)

22 A Sru吵。frheRelarionship belWeen rhe Characrerisrics ofJnrernarionalizarion Course and Performance: The Degree， 始loci似 andRhythm of Jnrernationalization

Table 4

Mean

,

SD

,

and Correlation Matrix for the Sample Subsets oflnternationalization Degree and Velocity

Variables Mean S,D, 2 3 4 5 6 7 8 9 10 11 I.ROA 0.084 0.099 1.000 2.ROE 0.085 。 206 0.868 1.000 3.lnt'l degree 3.857 5.314 -0.049 -0.012 1.000 4.lnt'l degree' 43.105 233.66 一 0.030 0.010 。 828 1.000 5.1nl'I degree 3 1194.04 14927.32 -0.022 0.014 0.654" 0.953"' 1.000 6.1nt'I velocity 。219 。 287 0.056 0.065 0.750 0.615 0.502 1.000 7.lnl'l velocity 2 0.130 。 713 0.020 0.045" 0.567" 0.G85" 0.654 。786 1.000 8.Firm size 2.528 。 494 0.013 -0.020 0.395" 0.230" 0.132" 。 266" 0.153"' 1.000 (Iog) 9.Debt ratio 。 404 。 157 -0.347 -0.33 r 0.018 0.003 -0.006 -0.028 -0.002 。 116" 1.000 10.Total diver. 。 921 。502 -0. \16 -0091 0.121" 0.084" 0.047" -0.015 0.010 0.056" 0.080" 1.000 II.Unrelated 。 275 。 318 0.025 0.033 0.045 0.022 0.006 0.020 0.006 -0.\16" 0.049" 0.354" 1.000 diver. 12.R&D mtenSlty 0.033 0.056 -0.0\1 -0.033 0.052 -0.040 -0.029 0.063" 0.000 -0.093" -0.286" -0.056" 0.001 "p < 0.01, *p < 0.05 ; n = 3,541

Chiao Da Management Reνlew 均1.31No. 1.2011 23

Table 5

Mean

,

SD

,

and Correlation Matrix for the Samplt: Subset of lnternationalization Rhythm

Variables 如tean S.D. 2 3 4 5 6 7 I.ROA 0.089 0.077 1.000 2.ROE 0.092 _{。 177 。 772} 1.000 3.1 側'1rhythm 1.053 3.409 0.035 0.056 1.000 4.Firm size (log) 2.518 0.494 .0.006 0.084 。.070 1.000 5.Debt ratio 0.398 。.146 -0.297 0.285 -0.065 。 126" 1. 00。 6.Total diver 0.916 0.457 -0.155 -0.121 0.009 0.065 0.097 1.000 7. Unrelated diver 。 288 。 286 0.033 0.049 0.020 -0.143 0.053 0.367 1.000 8.R&D intensity 0.034 。.052 0.061 0.026 0.034 -0.086 -0.355 -0.099 -0.036 **p < 0.01, .p < 0.05 ; n = 730

24 A Sfudy o{fhe Relafionship be仰自nfhe Characferistics of Jnternationalization Course and Performance: The Degree，始loci似 andRhythm olInternationalization

the S-curve model developed from the Westem developed economies (Contractor et al., 2003; Lu and Beamish, 2004) is validated in an emerging market.

Table 7 summarizes the empirical results of the relationship between intemationalization velocity and firm performance. Similarly, the significance of the three model fit tests (F 6.310, P < 0.01; LM = 1,514.33, P < 0.01; Hausman test = 171.80, P < 0.01) lent support to the fixed-effect model, which provides 62% of explanatory power in ROA variance. Because ROA is negatively correlated with intemationalization velocity (t = -6.842, p < 0.01) and positively correlated with the squared term (t = 3.345, p < 0.01), the U也aped curvilinear relationship is validated. The analysis derived highly robust results in the ROE model (t = -6.704, P < 0.01 for the first order term; t = 3.052, P < 0.01 for the second order term). Consequently, H2 is supported.

The empirical evidence examining the relationship between intemation-alization rhythm and performance is reported in Table 8. The results consistently reveal that firm profitability is negatively correlated with the measure (kurtosis) of the intemationalization rhythm in both ROA and ROE models (ROA: t =

-1.849, p < 0.1; ROE: t = -2.414, p < 0.05). The results indicate that a volatile

rhythm of intemationalization pace could be detrimental to fi口n performance Therefore, the results suppo口 0叮 H3 and are in accordance with the findings of the literature (Vermeulen and Barkema, 2002).

As for the control variables, debt level, total diversification, and R&D intensity consistently and significantly demonstrate their negative influences on firm profitability. In accordance with Table 3, information and electronics firms possessed superior profitability than firms in other industries.

H4 integrates the first three hypotheses and postulates that firms fit within the normative criteria of intemationalization characteristics will have better performance than those that do not. In examining H4, we first classified all sample firms by quartiles of the three intemationalization attributes into eight clusters, each representing a portfolio of different intemationalization characteristics. The quartiles for intemationalization degree, velocity, and rhythm are listed in Table 9. Considering the three-staged S model, firms that have moderate levels of intemationalization degree (the middle 白的 percentiles)should

Chiao Da Management Review Vol. 3/ N，ο/. 20II 25

outperform the rest of the intemationalized firms. On the contrary, firms that

either deliberately (below and in the first quartile) or speedily (above or in the third quartile) intemation-alized their operations and markets will have superior

performance as opposed to those that intemationalize at a moderate pace (the

middle fifty percentiles). Finally, firms that have a regular rhythm (lower kurtosis) in intemational expansions are expected to perform better than those with

unstable paces (i.e., explosive expansion followed by stagnancy). Accordingly,

firms that simultaneously demonstrate moderate degrees, slow or fast speeds, and

regular rhythms of intemationalization (i.e., cluster 8 in Table 10) should have the highest intemationalization performance compared to firms in the other clusters. Table 10 shows the sample sizes of the eight classified clusters and their

corresponding average profitability. As hypothesized, the eighth cluster containing

the firms that best fit in the norl11ative prescriptions suggested by the first three

hypotheses demonstrates the significantly highest profitability among all clusters. Therefore, H4 is supported.

5. Conclusion

5.1 Discussion

ln light of the theoretical gaps encountered in intemationalization literatu時，

this study develops a framework that integrates multiple facets of

intemationalization characteristics for comprehensively examining the relationship between intemationalization and firm performance. The empirical

results well suppo此 ourhypotheses, which are summarized as follows. First, this

study adopted the most recent S-curve model that postulates the relationship between intemationalization and performance as a three-staged curvilinearity in

which firm performance decreases with initially low leve\s of intemationalization but becomes positively correlated with moderate levels of intemationalization and

decreases again at high levels of intemationalization. The empirical results of this

study suppo付 this three-staged sigmoid curve 1110del in an emerging economy

26 A Study ofthe Re/alionship between the Char，αclerislics of Jnrernαtionalization Course and

Per(ormance: The Degree， 始/oci紗" and Rhythm o( Jnternationalization

Table 6

ResuIts for Internationalization Degree干erformanceRelationship

(n = 3,541)

ROA ROE

Model 2 3 4 5 6

Variable OLS model Fixed elfec! Random elfec! OLS model Fixed elfec! Random elfec!

model model model model

Control variables

Fiπn slze 0.023 0.083 。 035 0.024 。 228 0.060 (6.545) (8.546) (6.989) (3.265) (10.435) (5.728) Debt ratio -0.244) 一0.240 -0.257 -0.486 -0.595 -0.552 (-24.110) (-16.070) (-21.902) (-22.913) (-17.578) (-21.891) Total diver -0.018 -0.017 -0.020 0.027 -0.031 。 032 (-5.401) (-2.958) (-4.789) (-3.858) (-2.354) (-3.566) Unrelated diver. 0.024 0.004 0.013 。 041 一0.001 0.022 (4.538) (0.586) (2.244) (3.683) (0.049) (1.703) R&D intensity 句。 262 -0.845 -0.534 -0.628 -1.635 -1.050 (-9.096) (-17.545) (-15.043) (-10.398) (-14.985) (-13.855)

Food, textile & -0.043 -3.311 一0.057 一0.111 4.667 -0.134

olhers _{(-8.300) (-0.000) (-6.389) (-10.230) (0.000) (-7.571)}

Plastics & -0.022 -4.367 -0.030 -0.041 6.012 。 049

chemicals _{(-4.441) (-0.000) (-3.352) (-3.949) (0.000) (-2.938)} Metal& -0001 -2.983 -0.011 -0.006 3.428 -0.020 machineries _{(-0.092) (-0.000) (-0.916) (-0.398) (0.000) (-0.870)} Independent variables Int'l degree 一 0.015 ••• -0.030 。 0.024 一 0.023 -0.062 0.043 ( -4.939) (-7.079) (-6.904) (-3.537) (-6.521) (-5.682) Inl'l degree' 0.003 0.004 0.004 0.007 0.009 0.008 (2.509) (2.741) (2.895) (2.727) (2.724) (2.941) Int'l degree J 0.000 -0001 0.000 -0.000 0.001 -0.000 (-2.078) (-1.744) (-2.019) (-2.158) 去1. 818) _~ F-value 69.380 8.240 64.690 6.440 Adjusted-R' 。 175 0.621 。 165 。 552 Ftest 6.250 4.850 LM test 1,549.18 1,016.61 Hausman (est 132.32 154.05

*串串p< O.Ol,**p < 0.05，可<0.1; t-values are in parentheses : Infonnation and electronics industry is set as the reference group for industry contrast

Chioo Da Managemenf Reνiew Vol. 31 No. 1. 2011 27

Table 7

Resu1ts for Internationalization Velocity-Performance Relationship

(n=3,541)

ROA ROE

Model _{7 8 9 10 11 12}

Variables OLS model Fixed effect Random OLS model Fixed effeCI Random effect

model effect model model

model Control variables Firm size 0.013 。 083 0.027 0.012 。 232 。 048 (4.040) (8.522) (5.564) ( 1.742) ( 10.553) (4.692) Debt ratio -0.241 -0.244 -0.257 -0.483 -0.603 一0.554 (-23.732) (-16.303) (-21.906) (-22.741) (-17.846) (-21.948) Total diver 。 019 -0.015 -0.021 -0.028 -0.026 -0.033 (.5.720) 卜2.607) (-4.918) (.3.935) (-1.982) (.3.678) Unrelated 0.022 0.002 0.011 0.038 .0.005 0.018 diver. _{(4.156) (0.272) ( 1.793) (3.468) (-0.309) ( 1.372)} R&D -0.260 .0.846 -0.530 .0.628 .1.637 -0.977 lntenslty _{(-8.959) (-17.547) 卜14.863) (.10.359) (-15.010) 卜 13.6991} Food, textile .0.040" .3.325 -0.059 一0.106 5.148 句。13X & others _{(-7.529) (-0.000) (.6.511) (.9.598) (0.000) 卜 7.667)} Plastics & .0021 -4.385 .0.032 -0.040 6.640 .0.056 ... chemicals _{(.4.210) (.0.000) (.3.803) (-3.747) (0.000) (.3.340)} Metal & 0.003 .2.978 .0.011 -0.000 3.867 .0.022 machineries _{(0.473) (-0.000) (-0.957; 卜。023) (0.000) 1-0.9351} I ndependent variables Int'l velocity 0.003 .0.021 .0.01 時 。 005 -0.005 -0.017 (1.316) (.6.842) (.3.542) (09 弓 9 (.6.7041 (.3.0381 Int'l 一0.000 0.001 0.000 0.000

“

₀₀₂ 0.001 velocity' _{(.1.064) (3.345) (1.545) (υ57ï) (3.052) (1.772)} F-value 72.730 8.220 70.160 6.450 Adj-R' 。169 0.620 。16~ 。 5:'2 F test 6.310 4XI8 LM test 1.514.33 985.57 Hausman test 111.80 180.64

••• p < O.OI....p < 0.05..p < 0.1; l-values an,: ;n parenrheses : Information :md elel':lror刊cs in1ust門!is set 3S the reference group for industry contrast

28 A Study of the Relationshψ between the Characteristics of lnternationalization Course and

Performance: The Degree， 始locity，and Rhythm of lnternationalization

Table 8

ResuIts for Internationalization Rhythm-Performance Relationship

但二平且

Variables ROA ROE

Intercept 0.172 0.350'" Control variables Finn size 0.056 -0.028 (1.541 ) (-0.763) Debt ratio -0.398 .. -0.371 ... (-10.477) (-9.682) Total diver. -0.104 ... -0.074 (-2.611) (-1.834) Unrelated diver 0.076 .. 0.063 (1.920) (1.579)

R&D intensity -0.093 ... -0.133 ...

( -2.408) _(-3.435)

Food, textile & others -0.118 ... -0.131'"

(-3.170) (-3.499)

Plastics & chemicals -0.068 -0.054

(-1.820) (-1.425)

Metal & machineries 0.027 -0.038

(0.760) (-1.043) Independent variables Int'1 rhythm -0.065 • -0.086" (-1.849) (-2.414) F-value 16.205 ... 14.439 A句 _R2 0.166 0.150

抖 *p< 0.01 ，叫'p< O.肘，*p< 0.1; I-values are in parentheses; Infonnation and electronics indus仕y is set as the reference group for industry con甘ast.

Table 9

The QuartiIes of Internationalization Degree

,

Velocity and Rhythm 但二且主

且也坐缸里正

First quartile (Q 1) 1.33 Second quartile (Q2) 2.60

Third quartile (Q3) 4.60 • Average across observation time pe討od

Int'l旦些巫!y 0.07 0.14 0.27 I肘，但坐坐i笠 -1.29 1.74 4.99

Chiao Da Management Review Vol. 31 No. 1,2011 29

Table 10

Performance Differences of Firm Groups by Characteristics of Internationalization Course: Degree, Veloci且， and Rhythm

Firm #of Int'l Int'l 10t'l ROA ROE

group firms degree velocity rhythm Meao Raok 此1eao Rank

8 69 moderate Slow/fast regular 。111' 0.130'

7 42 moderate Slow/fast 1汀egular O.IOlb

2 0.061 c ₇

6 116 moderate moderate regular 0.096 b _{3 O.IIO}b ₂

5 110 moderate moderate irregular 0.084 b ₅ 0.090 b 4

4 95 lowlhigh Slow/fast regular 0.080b

7 O.077b 5

3 133 lowlhigh Slow/fast irregular 0.081 b _{6 0.076}b ₆

2 61 lowlhigh moderate regular 0.069C

8 0.053C

8

57 lowlhigh moderate irregular 0.089 b 4 0.096 b ₃

Wilk's Lamda 0.963"

F-value 2.292" 1.447

的，Chomogeneous subsets Cα= 0.05); **p < 0.05

between intemationalization and performance encountered in past studies but also accentuates the existence of both a threshold level and an optimal level of firm

intemationalization. This implies that higher and lower degrees of

intemationalization beyond these threshold and optimal levels can be harmful to firm performance.

Second, the empirical evidence of this study also supports the proposed U-shaped pattem of the relationship between intemationalization velocity and firm performance. The result means that firms that either deliberately

intemationalize their markets or speedily expand international operations can reap net positive benefits from internationalization; conversely

,

the benefits will not be

salient if firms undertake international involvement at a moderate pace without demonstrating a specific strategic intent. Finally, this study builds on the research of Vermeulen and Barkema (2002) and further confirms that fírms can directly benefit from a regular rhythm of internationalization as opposed to a volatile one. Therefore, this study plays a more significant role in describing the effects of internationalization rhythm on firm performance than the past study does

30 A 511峙。{theRelationship berween the Characteristiζ古 oflnternationalizationCO!lrse and

Perjòrmance: The Deg!'ee. Velocity. and Rhythm oflnternational即 tlO n

maintaining a stable internationalization rhythm may be more important for firms

in emerging economies than for those in the Western developed economies. To conclude, the empirical evidence of this study has helped to delineate an optimal portfolio of internationalization characteristics that firms can benefit from. Firms with such an optimal portfolio of internationalization characteristics should outperform those that do not possess these optimal characteristics. Our study also cOIToborates this internationalization-performance logic through a grouping analysis that derives a highly consistent conclusion

5.2. Theoretical Contributions and Managerial Implications

Theories concerning firm intemationalization such as IPLC (Vernon, 1966),

stage model (Johanson and Vahlne, 1977), organizational learning (Ruigrok, and Wagner, 2003) and network theory (Johanson and Mattson, 1988) all regard firm internationalization as an incremental process in which every entry decision is

interdependent. This theoretical perspective implicitly suggests that it is

inadequate to scrutinize the internationalization-performance relationship solely

based on a static examination, as has often been done in past studies. Another gap of internationalization literature lies in the failure to consider other

internationalization characteristics beyond the degree of internationalization. When considering internationalization on a time basis, the influences of process

characteristics such as velocity and rhythm on firm performance should be taken

into account. Nevertheless, few studies have probed this particular issue

(Vermeulen and Barkema, 2002; Wagner, 2004). Furthermore, few, if any, studies simultaneously integrate these multiple facets of the internationalization process

into a comprehensive examination that outlines an optimal course of

internationalization for firms to follow. Speci日cally，in light of this literature gap,

this study has successfully depicted an optimal combination of

internationalization characteristics that leads firms to attain their best performance. The contributions of this study are salient, not only because they replace the static

perspective with a dynamic view of firm intemationalization, but they also

provide more comprehensive implications of intemationalization when compared with contributions of past studies

Chiao Da Management Reνiew J勿1.31 No. 1.2011 31

Past studies have failed to confinn the direct effect of intemationalization velocity on finn perfonnance, but have only discovered its role in moderating the intemationalization-perforrnance relationship (Verrneulen and Barkema, 2002) These studies mostly based their arguments on the perspectives of organizational leaming and absorptive capacity and suggested that a slack schedule of intemationalization is important in order to develop the leaming mechanism that facilitates the dissemination of knowledge and experience across organizational boundaries. Tberefore, a low speed of intemationalization helps finns reap the benefits from intemational expansions. While accommodating these leaming perspectives, this study also inco巾orates other theoretical rationales to address the role of intemationalization velocity. We argue that the wisdom regarding intemationalization speed derived from organizational leaming theory is confronted by the strategic perspective (i.e., advantages of early entry timing) and the phenomenon of intemational new ventures. This study reconciles the contradictions of di仟erent theoretical perspectives by proposing a U-shaped relationship between intemationalization velocity and finn perfonnance. Through the validation of the empirical evidence, this study extends the pattem of the relationship between intemationalization velocity and perforrnance and, thus, deepens academia's understanding of the perfonnance implications of intemationalization ve\ocity.

The three-staged S-curve model, postulated from evidence in Westem developed economies, receives suppo口 from this current study. However, this S-curve model conflicts with the findings of previous Taiwanese studies that have shown an inverted U-shaped relationship between intemationalization degree and finn performance (Chiao el al., 2002; 2006). The rationales for the differences are discussed as follows. First, the samples in this study are all large-scale listed firrns while the previous study (Chiao et al., 2006) focused on small and medium-sized enterprises. Second, the intemationalization activities of Taiwanese finns are in a transitional stage where FDl has started to increase beyond exports. In the study of Chiao et al. (2006), tbe intemationalization degree was measured by the expo口